Renalytix PLC

LSE:RENX

Earnings Call Analysis

Earnings Call Transcript 2024-Q1

[Operator]

Good morning, ladies and gentlemen, and welcome to the Renalytix conference call to review first quarter fiscal year 2024 financial results. [Operator Instructions] As a reminder, this call is being recorded for replay purposes.I would now like to turn the call over to Peter DeNardo of CapComm Partners for a few introductory comments.

[Peter DeNardo]

Thank you, Libya. Thank you, all, for participating in today's call. Joining me today from Renalytix to provide formal remarks are James McCullough, Chief Executive Officer; Howard Doran, Chief Business Officer; Tom McLain, President; and James Sterling, Chief Financial Officer.Before we begin, I'd like to remind you that management will make statements during this call that include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Any statements made during this call that relate to expectations or predictions of future events, results or performance are forward-looking statements.Examples of these statements include, without limitation, the potential benefits, including economic savings of KidneyIntelX, the commercial prospects of KidneyIntelX, including whether KidneyIntelX will be successfully adopted by physicians and distributed and marketed, our expectations regarding reimbursement decisions and the ability of KidneyIntelX to curtail costs of chronic and end-stage kidney disease, optimize care delivery and improve patient outcomes, trends in our market and potential benefits of government policy change, the impact of COVID-19 and other world events on our business, our expectations regarding product development, strategic partnerships and collaborations, reimbursement decisions, clinical studies and regulatory submissions, our business strategies and future growth, including plans, expectations and opportunities for financing our operations and revenue projections and guidance.These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated or implied by these forward-looking statements. Accordingly, you should not place undue reliance on these statements. For a description of the risks and uncertainties associated with our business, please refer to the Risk Factors section of our annual report on Form 10-K that was filed on September 28, 2023, with the Securities and Exchange Commission.All forward-looking statements made on this call are based on management's current estimates and various assumptions. Renalytix disclaims any intention or obligation, except as required by law, to update or revise any financial projections or forward-looking statements, whether because of new information, future events or otherwise. This conference call contains time-sensitive information and is accurate only as of the live broadcast today, November 14, 2023.I'll now turn the call over to James McCullough. James?

[James McCullough, executive]

Thank you, Peter. Good morning, good afternoon.Given lousy sector market conditions in the early stage of our commercial rollout, we have been proactively organizing the company to last long-term while we leverage our proprietary technology to unlock value. First, we are in discussions to raise long-term funding, which would extend our operating runway considerably. While there are certainly no guarantees, we are targeting funding to be in place before year's end.Second, now that we have achieved FDA and published KidneyIntelX real-world outcomes performance data, we are in a position to substantially reduce our spend rate. This includes a more than 35% reduction in payroll expense and a more than 30% reduction in SG&A. These cuts are across the company, including executive compensation. And while it's difficult for those employees affected, it is the right thing to do given the current environment and the opportunity to maximize resources against our sales efforts.We have and are continuing to shift the composition of the company to focus on sales. With this commercial realignment, approximately half of our employee base is now directly responsible for sales and revenue recognition. Our new Chief Business Officer, Howard Doran, will detail sales force efforts and related initiatives shortly.Third, we are optimistic that short-term events in fiscal 2024 can help spur test and growth. These include: one, KidneyIntelX's Epic integration into Atrium Health, which should be finalized in December; two, other anticipated hospital systems coming online with KidneyIntelX for calendar 2024; three, expected inclusion of KidneyIntelX in the final updated international kidney guidelines publication shortly; four, progress towards the Medicare Local Coverage Determination, or LCD, with National Government Services, the Medicare contractor governing our New York lab; five, initiation of payment on KidneyIntelX billing from a second Medicare contractor First Coast Options last month; six, additional expected major insurance coverage decisions this fiscal year; and seven, importantly, publication of new KidneyIntelX outcomes data already submitted for peer review.Following FDA de novo Marketing Authorization June 29, draft guidelines inclusion, comprehensive reimbursement and proven published performance to improve diabetes and kidney health, KidneyIntelX is in a unique position to change preventative medicine in this very large and costly population health menus.Recent news highlighting potential breakthrough performance against diabetes and kidney disease, including the early stoppage of the Novo Nordisk FLOW trial for their GLP-1 therapeutic Ozempic, signal a new era in kidney disease preventative medicine. There are now at least 3 classes of drugs available for treatment in the space with more to follow.As we saw this month at the American Society of Nephrology Kidney Week Conference in Philadelphia, there is a market shift towards preventative medicine in the kidney space that will place increasing burden on primary care to understand which patients are at risk and what medications should be used when. We firmly believe that knowing the patient biology with a blood biomarker-driven FDA-approved and widely reimbursed KidneyIntelX will be a critical part of the strategy to balance ballooning treatment costs, potential side effects and cocktail therapeutic applications in this era.We are pursuing programs to validate KidneyIntelX technology drug response scores to these various therapeutics with pharma industry players and our partners at [ Joson Diabetes Center ] in the Mount Sinai Health System. Our KidneyIntelX technology therapeutic response clinical program is something we hope to be able to report on as early as next calendar year.Our experience with the FDA de novo pathway in achieving broad-scale reimbursement and artificial intelligence-enabled blood biomarker diagnostics should prove especially valuable in commercial efforts here. We look forward to updating you through 2024 in all of these developments.And I will now turn over to Howard Doran, our Chief Business Officer, to discuss aspects in sales. Good morning, Howard.

[Howard Doran, executive]

Thank you, James, and good morning.I have been in the diagnostic space for the better part of 30 years. The majority of that time was spent with Cytyc Corporation and Hologic. Cytyc was a startup focused on women's health and specifically cervical cancer screening with the ThinPrep Pap test. I started at Cytyc in January 1997 and over the next 10 years, held various sales and sales managed positions leading to a corporate role as VP of Sales and Marketing in 2004. ThinPrep became the new standard of care for cervical cytology over this time, representing over 85% of the cervical cancer screening testing market in the United States.When Hologic acquired Cytyc in 2007, I transitioned to President of Hologic Diagnostics, a position I held for 3 years and oversaw the acquisitions of ADESA and Third Wave Technologies. Post Hologic, I served as Chief Commercial Officer of Constitution Medical. CMI developed the innovative bloodhound hematology system for accurate diagnosis of blood-related diseases. CMI was acquired by Roche Diagnostics in 2013.Before my planned retirement, I served as President and CEO of LipoScience, a diagnostics company whose NMR LipoProfile test helped better manage patients with increased risk of developing a cardiovascular disease. LipoScience was acquired by LabCorp in 2014.I was introduced to James by a Renalytix Board member and spent several months evaluating the KidneyIntelX technology and traveling with Renalytix sales personnel meeting with clinicians. What became clear to me was not only did KidneyIntelX provide a vital service to doctors and patients, but that with a targeted sales approach, we can achieve a major impact on patient outcomes and the unsustainable health care costs that come with late-stage kidney disease and dialysis. My experience in the field convinced me to cut my retirement short and jump in to spearhead the significant opportunity for growth and positively impact patients.I've been very fortunate to have built leading diagnostic sales and marketing teams that have made innovative products widely used and standard of care. Most importantly, having -- most importantly though, having watched 2 family members suffer through dialysis treatment with one ultimately getting a new kidney, I have seen the bad and the really bad in this space. I will think of them often while I'm on this journey as a motivator and reminder of how important it is the KidneyIntelX mission that we are working on together.A few highlights based on my early observations at Renalytix. Number one, to-date, we are rapidly completing the retooling and recruitment of the sales organization to focus on direct to primary care sales efforts. Four highly experienced account executives have accepted offers and will be onboarded through the remainder of this year. The sales team size will be 14 starting in 2024 with a focus on sales in high diabetes density regions in New York, Texas, Florida, North and South Carolina and Ohio.Two, with our full sales team in place, the most important goal remains assisting our customers and physician offices with consistent direction on how to identify patients that meet the KidneyIntelX FDA-approved indication of use criteria. Since I began, our ordering requisition process is now being streamlined to keep things as simple and accurate as possible for our customers and physicians.Three, we are moving quickly to ready the kidneyintelX.dkd FDA authorized tests for rollout in the March quarter. Our marketing materials are already quite good, but we are using the FDA launch opportunity to improve messaging to further reflect the unique advantages of KidneyIntelX technology and identifying patients at risk for kidney failure early on.Publication of the KidneyIntelX 1-year outcomes data likely this year should have positive impact on sales. We will also be prioritizing a peer-reviewed publication of KidneyIntelX cost-effectiveness on population-wide testing.Four, we began working this summer on more accurate targeting of primary care physicians serving a high concentration of patients with diabetes. Approximately 40% of these patients are likely to have existing chronic kidney disease and will meet the intended use criteria for KidneyIntelX testing. This targeting will allow us to go deep in our top target positions as opposed to going wide across all clinicians.I believe this will produce more routine ordering patterns from those top targets, which create true believers and advanced prognosis, believers that are more apt to be repeat orders of our test. One thing that is abundantly clear, particularly since spending time with James and the Renalytix team at the American Society of Nephrology Kidney Week earlier this month, the kidney space is undergoing a wave of innovation and a shift towards preventative medicine.A whole pipeline of new drugs adds promise to improving lives, but also complicates the picture, especially for primary care physicians who will be doing the majority of the deciding when to prescribe what drugs, et cetera.Particularly at the very business primary care level, this shift to preventative medicine and targeted drug therapy is going to require a KidneyIntelX gateway that can capture the current patient biology with blood biomarkers and provide a simple, accurate result that any primary care physician can use regardless of experience or training.Thank you for your time today, and I look forward to sharing more details with you all in the future.I would now like to turn the call over to Tom McLain, our President.

[Thomas McLain, executive]

Thank you, Howard, and good morning. When we launched KidneyIntelX, our commitment was to be positioned to offer testing to patients regardless of their ability to pay. While more than half of patients eligible for testing have Medicare fee for service or Medicare Advantage coverage, achieving that requires broad coverage and billing programs that meet patient needs.For traditional Medicare, we continue to see claim payment from National Government Services, the Medicare contractor responsible for payment of claims for tests that are run in our New York laboratory. NGS began paying under individual claim review for testing dates as of July 2022. Renalytix has also requested a local coverage determination, or LCD, from NGS.Driven by FDA approval in June, NGS formally began its LCD review during fiscal quarter 1. During the LCD review process, NGS suspended claims payment. As part of the 21st Century Cures Act, Medicare contractors are mandated to base an LCD on robust evidence. Part of that process is to convene subject matter experts when necessary to review the peer-reviewed published literature and to provide input that plays a role in the development of the future coverage decision.NGS held its CAC meeting to review KidneyIntelX on August 28. The committee review included nephrologist and primary care physicians from the NGS region, who answered predefined questions about KidneyIntelX testing. The transcript from that discussion has been published on the NGS website.In general, we believe the comments supported the quality of the published evidence and we noted the primary care clinician concluded that KidneyIntelX testing would be beneficial in caring for early-stage diabetic kidney disease patients. Following the CAC meeting, the NGS medical directors consider the CAC member observations and the peer-reviewed literature and also evaluate evidence of utilization and outcomes benefits.When a coverage decision is reached, they draft a coverage policy submitted to CMS for review and comment and then schedule it for review at an open public meeting. As an update, NGS resumed payment for claims in November. The next open meeting is expected in February 2024.During NGS LCD review period, we also submitted claims to First Coast Options, the Medicare contractor responsible for payment of claims for tests run in our Tampa, Florida, laboratory. First Coast began paying for submitted claims in October of 2023. We will continue to submit claims to both NGS and First Coast.Turning now to private payers. With FDA approval in June 2023, we have continued to expand coverage for testing in our key sales markets. We continue to see payment for KidneyIntelX testing from Medicare Advantage plans at Medicare CLFS published price of $950. We are also being paid by other private payers in our key sales regions, including New York, Illinois, Texas, Florida and the Carolinas.Our focus is on expanding coverage contracts in these regions, building on our successes, including EmblemHealth, BlueCross BlueShield, Illinois and BlueCross BlueShield of Texas. As a result of all of these accomplishments, our policy is to accept all patient insurances.To-date, almost 90% of patients tested have an out-of-pocket obligation ranging from $0 to $20. In order to assure that patients are not surprised by high deductible plans or out-of-network charges, we do not process tests with an estimated patient out-of-pocket cost greater than $50 without patient consent.While this does not happen often, we hope to avoid office and patient dissatisfaction with this policy. We're also able to offer a generous patient assistance program to patients who meet specified financial criteria. While NGS payment was suspended during Q1, we are encouraged that payment has resumed in Q2 and I look forward to keeping you updated on our progress towards a local coverage determination on future calls.I would now like to turn the call over to James Sterling, our Chief Financial Officer. James?

[Oliver Sterling, executive]

Thank you, Tom. Today, we issued the financial results for the first quarter of fiscal year 2024, which ended September 30, 2023. Our GAAP financials were filed today on Form 10-Q. Figures I will discuss here are based on our GAAP financials and quoted in U.S. dollars, which is our reporting currency.For the first quarter, we recorded revenue of $460,000, compared to $970,000 in the first quarter of the prior fiscal year. Overall testing volume remained steady with total tests of 1,297 of which 56% were billable, which is a slightly higher total test volume than in both the prior quarter as well as the prior year fiscal first quarter.As previously communicated, certain study-related tests at Mount Sinai are no longer billable following the transition from Mount Sinai as payer to traditional commercial insurance billing. In the year ago period, 82% of our testing was billable. We expect the billable percentage to increase as commercial testing becomes a higher portion of the total in the quarters ahead.Revenue reported in the quarter does not include tests billed to certain payers that are not yet being recognized as revenue until there is a demonstrated history of payment from such payers. This represented nearly 250 tests in the first quarter or about 34% of the billable total. This also now includes testing billed to NGS Medicare until regular payment resumes pending the outcome of the local coverage determination process.Operating expenses for the first quarter were $8.8 million on a GAAP basis, significantly reduced from the $12 million for the prior year period. This reflects the result of actions we previously took to lower operating expenses through program, vendor and employee reductions.More recently, we have taken a sharper knife to operating costs and implemented a plan to reduce payroll expense by over 35% year-over-year and total SG&A by more than 30% year-over-year, all while preserving the sales capacity to demonstrate revenue growth in the quarters ahead.Our focus now on key sales regions combined with completion of milestones already discussed, allows us to lighten or eliminate spend in several areas, including clinical trial work. We will see the results of these changes starting in the immediate quarters ahead and continuing into the next fiscal year.Net loss for the first quarter of fiscal 2024 was $10.1 million or $0.11 per share, inclusive of a foreign currency gain of $289,000. This was down from a net loss of about $12 million or $0.16 per share for the first quarter of fiscal '23, which included a foreign currency gain of $1.7 million.We ended the first quarter with approximately $13.9 million of cash as of September 30, 2023. We are actively engaged in financing discussions and are hopeful to close the transaction, which, coupled with our cost reduction activities, is expected to extend our cash runway into calendar 2026.Operator, we can now please open the call for questions.

[Operator]

[Operator Instructions] And our first question coming from the line Mark Massaro with BTIG.

[Mark Massaro, analyst]

And Howard, it's nice to hear from you. Maybe if we could -- there's a lot of ground to cover. So I know, Howard, you talked about the initial states that you're targeting. Just maybe for folks that might have missed everything that you ran through, can you just remind us what the territories are? And then I know you had a sales team on the ground previously. Are you basically looking to optimize that commercial team of 14? So I'm just curious where you are in terms of making potential changes to that team?

[Howard Doran, executive]

So initially what we did is we made some performance-related changes a couple of months back and started re-recruiting for those opportunities. As stated, the primary areas of focus for us right now will be on a move-forward basis, New York, Texas, Florida, North and South Carolina and Ohio. We currently have 10 folks in the sales organization, most who joined us in August of this year.And we continue to work and develop those folks to be key contributors on a move-forward basis. Interimly, as part of some of those performance-related terminations, we have been actively recruiting new folks as well. And again, those are the 4 folks that we'll be starting between now and the end of this calendar year. And I would say the biggest difference of what we were really looking for is I'd like to say we were looking for the top 10 percenters.And what I mean to that is finding folks that have been in the primary care space, before as well as calling on specialists. But more importantly, that have distinguished themselves within their organizations as prior key club winners, top producers at whatever category that they were challenged with. So I just feel like we've elevated the game with these new folks that we'll be starting between now and the end of the year.

[Mark Massaro, analyst]

Okay. And I know you guys were previously working with EVERSANA. Is that partnership still active or how should we think about that going forward?

[James McCullough, executive]

Yes. Hey, Mark, it's James. That partnership is still active. Although Howard obviously changes the game when we originally signed up with EVERSANA, we didn't have Howard, but the partnership with EVERSANA will continue.

[Mark Massaro, analyst]

Excellent. Okay. I could use maybe a little bit of help to understand why the payment from NGS was stopped. And then I believe it's now resumed, good to see the payment here in November. But maybe can you provide a -- maybe just an update as to why the payment was suspended? Did it have something to do with the CAC and the LCD discussion?

[James McCullough, executive]

So you, Tom.

[Thomas McLain, executive]

Thanks, James. Mark, yes, so we were notified when the LCD process was initiated. This was around the timing of the CAC meeting that they would not continue payment of claims while they were considering all of the evidence, the medical directors comprehensively with regard to the appropriateness of support for medical necessity overall.So when we receive that -- we appreciated receiving that communication from NGS. We have not heard from NGS as to why they have resumed payment of testing effective November 1, but we would understand that that had to factor in what they heard during the CAC meeting and also the evidence review that the medical directors have done as a group.

[Mark Massaro, analyst]

Okay. Great. And then it is very nice to see First Coast come on. Looks like they are paying claims. Maybe could you just remind me if you're pursuing an LCD with First Coast and what timing might look like there?

[Thomas McLain, executive]

We knew with First Coast that for tests like KidneyIntelX, they have entered into a process where they pay claims and don't require an LCD. We have met with the medical directors to go through the evidence for KidneyIntelX before we submitted those additional claims. We will be meeting with them again during the first quarter for an update on FDA and all of the published evidence that has been developed since our meeting earlier this year.And as part of that meeting, we will discuss whether going forward with the LCD process is going to be necessary in this case, or whether we can just continue to operate under the model that we have right now where they're paying for our claims within the 7-day window that's typical for payment with Medicare contractors.

[Mark Massaro, analyst]

Okay. Great. And maybe last question for me. I know you don't need it, but it might be a nice to have to have the national coverage determination. Can you just clarify the comments you made, have you submitted for that? And can you just maybe brief us on any conversations you've had with respect to both the filing and perhaps the expected timing of obtaining an NCD?

[Thomas McLain, executive]

So Mark, I would refer you, as you know, there is a rule moving forward that would guide the coverage of breakthrough technologies by Medicare at a national level. This is for any medical device, so anything approved through CDRH. In that rule, Medicare clearly stated that with regard to diagnostic tests that it is their preference that diagnostic tests are covered through the local coverage determination process through the MAC.And that they believed that the MAC was the most effective way for those coverage decisions to be reached. However, diagnostic tests that we're facing challenges at the local level or on diagnostic tests that had a national Medicare -- had national Medicare policy implications that they could be considered at a national level. So the typical pathway for a test like KidneyIntelX is to be LCD.That said, as you correctly recalled, because of the delays that we had faced with NGS, we had met with national -- CMS nationally and notified them that we intended to apply for a national coverage determination. And they -- and why, because of the -- what we felt was a very slow movement forward with NGS.We're now going back to CMS, because NGS does appear to be moving forward with the LCD process to understand with that development, will they consider the review of our application for a national coverage determination. That's a lot packed into a few sentences. Did that all follow? Or do you have any follow-up questions on that, Mark?

[Thomas McLain, executive]

No. Tom, I really appreciate that. I followed everything and I appreciate all of those updates. So I will hop back in the queue.

[Operator]

And our next question coming from the line of Paul Stewardson with Stifel.

[Paul Stewardson, analyst]

Just calling in for Dan Arias. Just wondering if you can give some color on what to expect once this Atrium Health Wake Forest health system gets online next month with the integration. Can you talk about sort of how that's going to roll out in terms of reimbursement rate initially and over the course of the next few quarters as well as volumes and if there will be a bit of a pause or what we can expect to see for the next few quarters if that kicks in?

[James McCullough, executive]

So the good news with Atrium Wake Forest is they have a superb integrated program from population health and to primary care and other physicians. We really view it as a model for how care should be delivered and supported, especially on the preventative medicine side. So KidneyIntelX slots right into that system. And the other good news is that we spent the last couple of years with the leading clinicians at Atrium Wake Forest using KidneyIntelX in an IRB controlled real-world evidence program.So they've used KidneyIntelX in the system, in this care pathway with physicians looking at risk and diabetic kidney disease. And I believe that we've passed through 1,600 patients tested and these results will be published. We've already seen obviously the preview of this and we're very pleased with the fact that KidneyIntelX appears to be performing very similar to the real-world evidence program, which is completely independent in a different area of the country in a different system is Mount Sinai.So this is prima facie evidence for us that KidneyIntelX is doing the job in the care pathway to assess risk and help manage disease. And because Wake Forest is now familiar with KidneyIntelX, we would anticipate a relatively smooth rollout across certainly primary care treating physicians throughout the system. The integration of KidneyIntelX in the Wake Forest, the Epic system is complete and should be completed in the Atrium Epic system in December. Commercial testing will start shortly thereafter.In terms of the reimbursement, we are continuing to contract with multiple insurance companies and obviously, with Medicare, Medicaid at the $950 Medicare-prescribed price. We will not contract off of that price at the moment. So you can expect that to be the price that we're moving forward with. But we're very excited about Atrium Wake Forest. It is a significant system and having the data that's been generated internally, we think that gives us and the clinicians a lot of experience to move forward with KidneyIntelX on a broad basis in calendar 2024.We're not going to project the uptake in that. Let's see how it goes. But again, this is going to be a coordinated effort so that we make sure we have proper support from the Renalytix side as well as the internal support which is being generated from population health and other leading physicians within Wake Forest. Tom, would you like to comment on that any further?

[Thomas McLain, executive]

No, I think you covered that very well. And just to reiterate that because of the study that they have done across primary care within the Wake Forest and Atrium Health systems, they do have experience with that. They understand what it can do in terms of pharmacy management, appropriate referrals, patient engagement. So that -- that is something that they have firsthand knowledge to take advantage of as they are ready to expand our testing broadly within the health system. And so we're very excited about it.

[James McCullough, executive]

And I'd just like to add one thing. Several years ago, we made the decision to invest heavily in real-world utility and real-world outcomes data, especially since the reimbursement paradigm is moving towards outcomes data, not just utility data. And so we've invested heavily, for example, in the Mount Sinai Health System real-world evidence program.We've invested heavily in the Atrium Wake Forest real-world evidence program. All of this is now starting to bear fruit. We're having multiple publications come out on that real-world evidence. This real-world evidence is a critical part of establishing a broader reimbursement. And obviously this real-world evidence is going to help in terms of generating adoption with clinicians. It takes time.It takes a long time to get this done, but we've done all of the fundamental work leading into calendar 2024 to make sure that we do have an extensive risk assessment program throughout the Atrium Wake Forest System to benefit patients in need. So beginning to bear fruit now off of the investments that we've made going into this real-world evidence, core part of our program.

[Paul Stewardson, analyst]

That's very helpful. Really appreciate the color. Just one more from -- in terms of the growth outlook that was provided last quarter, could you just touch on sort of what you see happening in the near-term in terms of you mentioned the sales team is still being built out towards those objectives. What are you kind of expecting to see just directionally, sequentially through the fiscal year, the cadence from 1Q to 2Q in terms of volumes and so forth, is that something that looking for a step-up or weighting a little bit more towards the back half as we wait for the sales team to kind of kick into full gear?

[James McCullough, executive]

Yes. So going into calendar 2024, we'd like to see a step-up. And equally as important, we'd like to see growing evidence of commercial traction in multiple areas. So right now with a reduced cost structure, with market conditions the way they are, the critical objective for the remainder of fiscal '24 is to demonstrate commercial proof-of-concept in all of the key markets that we have targeted.It's very focused, very specific territories in territories where we have extensive reimbursement, which again, has been our goal from the very beginning. We're starting to see territories where we have over 90% form of insurance payment against patients with any indicated use of KidneyIntelX. With Howard's sales force now coming online, which will be full force and effective going into the March quarter of next year, with groups like Atrium Wake Forest coming online with additional data publication, this should all move to stimulate additional testing volume in these territories.That's what we're focused on. And again, I mentioned this early on, because we've crossed regulatory thresholds, because we've crossed data production thresholds, we're now in a position where we can realign the resources in the company significantly towards sales and marketing away from development regulatory other activities, which require a significant investment and take a long time. We've now crossed the threshold.So really, this is very much a sales and marketing game. We are very much focused on how can we drive sales in the short-term. And certainly, all of the milestones that we've talked about should stimulate that. We're not going to forecast, but I am optimistic about 2024, now we need to prove it.

[Operator]

And our next question coming from the line of Randy Baron with Pinnacle Associates.

[Randy Baron, analyst]

I have one question for James and then one for Howard. James, I just would love you to drill into the first bullet point that you addressed, which is the fund raise. I mean, you said you're going to hopefully be funded through calendar '26. I'm just curious what that means in terms of directionally as much as you can give us the size of the rate or range for the size of the range, what your cash burn is going to be per quarter assuming no ramp in sales, et cetera, whatever you can share?And Howard, my question for you, now that you're in the company is, as you've looked through the business, just in a layman's perspective, what do you think the number one hurdle that Renalytix needs to overcome to achieve sales is? And why has that not been overcome yet? And I get you're scaling the sales force, et cetera, but any kind of anecdotal stuff you can give us or how that could change going forward would be helpful?

[James McCullough, executive]

So Randy, thanks, compound question. We're in discussions to raise funding. It's a very, very difficult market as you know and as everybody knows. Our goal is to put a balance sheet, which will be largely focused on commercial efforts in place before the end of the year.And we have significant players, institutional players at the table in discussions to do that. I'm not going to characterize that because we're in the middle of the process, but we're looking at a number of options. And obviously we'll do everything that we can to maximize the value in that raise process.But again, very difficult market, concentration on really going after the cost basis has been helpful. And we will continue to do that as necessary in 2024 to extend the runway as far as possible. 2026 is an aspiration. It's based on a model we've created with cost reductions and a capital financing. And let's see how it goes through the remainder of the year, but I'm optimistic that we get there. [Indiscernible].

[Randy Baron, analyst]

And just on that note, James, before Howard goes, what do you think directionally, I mean, not to a number, but just directionally, how much lower is cash burn going with all -- I mean if I pencil out the math that OJ talked about, like how much lower does it go to $6 million? Does it go to $5 million a quarter? Does it go to $2 million just directionally?

[James McCullough, executive]

Yes. OJ, you want to address that?

[Oliver Sterling, executive]

Yes, sure. So speaking generally, we are working towards a goal of $3 million to $5 million cash burn quarterly by the end of this fiscal year and getting down to $1 million to $2 million quarterly by the end of fiscal '26 to give you a sense of what we're working on.

[Randy Baron, analyst]

And just so I'm clear, that would assume de minimis sales growth? Or what does that assume in the sales line to get to $1 million by '26?

[Oliver Sterling, executive]

It assumes some reasonable sales growth in addition to the cash -- the cost reductions that we've been talking about.

[Randy Baron, analyst]

Okay. And Howard, I'd love your take on kind of why sales haven't happened and what you think is changing now?

[Howard Doran, executive]

Randy, thank you for the question. In my -- spending -- obviously, spending some time in the field in the summer and certainly since I've come on board full-time, I think it really comes down to one thing. It's been a challenge at the clinician level to identify patients that meet our criteria. And what's a little bit unique about the situation is not only do we require certain features to be on the requisition form for processing the test, but we have a very targeted set of patients that we're looking for.And what I've been really impressed with is how quickly the clinicians get our message and why it's important and what KidneyIntelX can do for them, but their eyes kind of glaze over when you start talking about these are the patients that we need you to find. And a lot of it is in their systems. It's just finding the right person that can extract that. So that was sort of like an early on finding that I saw very, very early on.So we've been trying different tactics with targeted practices to kind of find that champion. And I think one of the first things we've done is as we start converting new offices, we let them know that there's some skin in the game they have to have here. There's some sweat equity. If this is going to work, finding those patients is actually paramount and we've been giving them some additional things that they can do to make that process similar.So that to me was one of the biggest hurdles in the past. It's still an ongoing project. We will continue to hone on it over time, but I think we've made some tremendous strides. And what we're seeing early on is evidence of that the new clinicians that we're closing in the last couple of months, once they start, we see a greater cadence of re-frequent orders. And that can't occur unless they're identifying patients more effectively. That to me is our, I think, our number one challenge.

[Operator]

[Operator Instructions] And our next question coming from the line of Jens Lindqvist with Investec.

[Jens Lindqvist, analyst]

I've got 2 or 3 questions perhaps. Firstly, on the [ Clin-Risk ] model, which also made some headlines during Kidney Week and as also mentioned alongside KidneyIntelX in the draft KDIGO guidelines, could you provide any more color on this? Does Clin-Risk represent a competitive threat to KidneyIntelX at all, and if not, why not?And secondly, on the planned cost reductions, just to make sure that I understand it correctly. Could you just confirm what period these will be achieved? Does this refer to the current financial year versus last year? Are these the level of annualized savings are ultimately achievable? Presently start with that?

[James McCullough, executive]

So Clin-Risk, we're very familiar with Clin-Risk. It is a population-based risk score. So it's very different than the KidneyIntelX approach, which is an in vitro diagnostic. And it is our firm belief that you need the biology, you need the patient's biology. That is going to drive the accuracy in early prognosis. And ultimately that drives the characterization of the disease, the biomarkers in the blood around therapeutic response, development, et cetera.So we think that KidneyIntelX as an in vitro diagnostic with biomarkers captures the patient's biology that is totally unique. Clin-Risk is a population health or a population-developed risk score. The other thing that's important to notice or to note is that we firmly believe in a holistic commercial model that's going to be required to go back to what Randy is asking and Howard is answering, why does it take so long to get adoption? Because it comes back to education at primary care.And it comes back to pushing standard of care, educating, all of that requires funding. And so you need a commercial model that can generate a margin at the front end of the disease, which is what KidneyIntelX has. It has an established price. It has a CPT code. It has been regulated. So we're fully validated now which is very important. And I think the challenge for a lot of the other general algorithms, which are being used on large data sets is how do you get them validated?Ultimately I believe they're going to have to run through FDA and that's going to be highly challenging and it's going to take a long time. I don't know if ultimately they can run through FDA. You're also going to have to generate a margin so that you can educate because that requires a sales force, it requires all sorts of activities. So you're going to have to have a reimbursement paradigm in place.So I think KidneyIntelX stands alone because it captures the biology from an actual blood draw. It's been validated by the Food and Drug Administration and we now have broad-based reimbursement coming in. So it's a very different animal than an algorithmic -- a general population algorithmic approach. Not that there isn't value. I think there's a lot of value in the algorithmic approach.But at the end of the day, you've got to have something that's regulated, reimbursed and especially as we move into this polytherapeutic, poly-pharmaceutic application in precision medicine where you have cocktails of therapies like the Ozempics of the world, SGLT2 inhibitors, you're going to have to be able to capture today's biology on that specific patient that's going to require a blood draw.And then you're in IVD land that requires regulation, et cetera. I'm going to ask Tom if you have any additions to that because I know you looked at all of these things.

[Thomas McLain, executive]

Sorry, James. Yes. We definitely have stepped back, looked at the full landscape and with what we have at Renalytix and the value proposition that we bring, we believe that we have identified the best path forward for having the greatest impact on clinical care and have -- and patient outcomes and doing it in a way that is very efficient for health systems and clinicians.

[James McCullough, executive]

And I'm sorry, Jens, the second part of your question was what? We went off on...

[Jens Lindqvist, analyst]

Yes. No, it was really on the timing of the -- on the cost reductions, whether the cuts that you're referring to refer to the current financial year versus last year or these are annualized savings to be achievable over time?

[James McCullough, executive]

No, we are...

[Oliver Sterling, executive]

So...

[James McCullough, executive]

Go ahead, OJ.

[Oliver Sterling, executive]

Sure. So the reduction effort is in process already when we talk about a 30% reduction and that's -- we expect it to be over that. In SG&A, that is intended to be this quarter next year compared to today, quarter -- so first quarter versus first quarter. But you'll see the evidence of that in the immediate quarters ahead as well as we work towards it. And I think you'll see that reduction having been achieved even the fourth quarter of this fiscal year, so before we get to the first quarter next year.

[Jens Lindqvist, analyst]

Okay. Could I just have one final question, sorry to take up so much of your time. The -- just doing the math on the pricing of billable tests, you get a number significantly below the $950 per test. Could you perhaps elaborate a little bit on what discounts are being applied at the moment because my understanding was that Mount Sinai was paying full price?

[James McCullough, executive]

Yes. The short answer to that is Mount Sinai transitioned to the full commercial reimbursement model. In other words, we had a contract with Mount Sinai that paid $950 on testing. That contract had ended, I think, sometimes in February and we shifted to a commercial reimbursement model where we started billing a whole sequence of commercial payers in the New York region.And that obviously impacted -- some of these tests are moving up on reimbursement. The pricing is $950. That's our contracted pricing, but not all of the tests were paid for, which impacted the average pricing. And also there were a sequence of study tests, which I think went into the total testing volume. Is that correct, OJ?

[Oliver Sterling, executive]

Non-billable study [indiscernible].

[James McCullough, executive]

Yes. That's correct.

[Operator]

[Operator Instructions] And I see no further questions in the Q&A queue at this time. Thank you, ladies and gentlemen. This concludes today's presentation. Thank you again for your participation. You may now disconnect.